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tv   Nightly Business Report  PBS  June 26, 2014 6:30pm-7:01pm PDT

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. this is "nightly business report" with tyler mathisen and susie gharib. >> upping its game, earnings from dow component nike tops expectations but there are three things investors in that stock need to watch. >> reverse robin hood? a former top federal reserve official says current upon tarry policy is benefitting the rich at the expense of all others. is he right? should be done about it? >> road trip, it was hard hit during the down turn so what is driving winnie's come back. we have that and more for tonight, june the 26th. good evening, i'm bill griffeth in again tonight for tyler mathisen. >> and i'm susie gharib. with the u.s. and much of the rest of the globe in the grips of world cup fever, we begin with a look at the company
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that's outfitting the u.s. soccer team. dow component nike. after the market closed the sneaker and apparel company jumped 5% and three cents per share more than analyst estimates. revenues came in better than expected and that's thanks to strong demand in the u.s. and several international markets. and news that worldwide orders were up 12% lifted shares in after hours trading. sarah eisen has more on what is next for nike. >> reporter: for nike investors there are three areas to watch, big sporting events like the world cup, china and technology. nike shares have fallen almost 3% many making them one of the losers in the dow in an up year so what are investors looking for to turn it around? a payoff in soccer sales. nike is spending big on world cup marketing. >> the world cup is a big boost in sales in terms of performance product and also sportswear or
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lifestyle product. we're seeing the football category continue to grow. we're the number one football company in the world. our market share in foot ware is tops in every country around the world, and we feel that with the invasion that we're introducing around this world cup, that's only going to get stronger and stronger. >> reporter: this year nike is sponsoring ten teams in the world cup including marketable teams like the u.s. and brazil. soccer, though less than 10% of total nike sales is growing fast thanks to growing interest in soccer in the united states. but for nike, it's not just about its home market. investors are also paying close attention to nike footwear and apparel sales in china. unlike fast growing competitors, nike gets most of the sales outside the united states. and china is the key growth market. nike has struggled there because of local competition, merchandising issues and a weaker economy but recently has been addressing the challenges and investors are looking for
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proof of a solid turn around. the other area of interest is technology. nike has reportedly been scaling back the wrist band to focus on apps and software for tracking fitness. there is a bigamistry what nike has planned. although shares are been under pressure, analysts says the tide is set to turn because of what he calls an exceptionally good product pipeline, including some upcoming sneaker releases next year. there is also word that viewer ratings and sales have been strong in brazil for the world cup. adidas expecting record soccer sales for 2014. adidas and nike controls most of the soccer market. that should bode well even if their sponsors end off facing off. for "nightly business report." i'm sarah eisen.
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late news from dupont. sharing dropping after it cut the second quarter and full year guidance citing lower than expected corn seed and sales and higher than expected write downs due to a high inventory of seeds. the stock was slightly lower in regular trade today. well, it was another down day on wall street despite some encouraging economic news, job claims dipped lower and personal incomes both edged higher a little bit in may but some were disappointed it rose half as expected so they lowered the growth forecast for the second quarter. the dow lost 21 and the nasdaq fell by a fraction and s&p off by two points. now wall street was buzzing about provocative comments from kevin warsh.
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he described the policies of benefitting the rich at the expense of the poor. >> if you have access to credit, the you've got a big balance sheet, the fed made you richer. so i would say this has been in some sense reverse robin hood. this is a way to make the well to do even more well to do because that's what the federal reserve can do. >> and warst suggested raising the benchmark. so is kevin warsh right? we have different views and senior economist at pnc. brian west berry disagrees. welcome. gus, why do you agree? why is this a reverse robin hood situation here? >> well, the fed policies certainly are making the well off wealthier. we seen big gains in stock prices and home values and those have benefitted wealthy households, but that's a side
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effect. that's not the goal. that's not what the fed is trying to do. they are trying to support economic growth that benefits everyone and the side effect is to make households wealthier. >> brian, your turn, make the case. >> first of all, if you borrow a lot of money with low interest rates that the fed is providing or if you're going to benefit more than if you lend money, right, with low interest rates. so if you want to try to separate the high income and low income but how much, whether they borrow or lend, you might be able to make that case. i don't believe that quantitative easing and low interest rates and fed activity is why the stock market is up. you know, you just reported nike or think of apple. i mean, these companies are making new products. they are selling them. they are helping their customers. it's not because of what the fed is doing, and those companies that are doing this, are getting
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wealthy, and so to blame it all on the fed, i just think is a mistake. >> gus, what about there might be those who would argue that fiscal policy, tax policy out of washington has as much to do with that as separation of the wealthy from the middle class these days as monetary policy? >> absolutely. it's not just a monetary policy story. certainly what is going on with taxes, what is going on with spending, we seen benefit cuts, spending cuts at the federal level hurt low and middle income households. that's part of the story. the federal reserve played a role, not deliberately, not trying to benefit the wealthy but getting economic growth started. >> i want to talk about investment approaches. if low interest rates have been good for the stock market and if you're an investor, whether it's your mutual fund or pension fund or 401 k, you benefitted. isn't that a good thing? >> it is. there is a couple of points here i would like to make. number one, it's not low
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interest rates boosting stocks, earnings are boosting stocks. we're at record corporate earnings right now. our companies in the united states have never made this much money, and they are making this much money because they are more productive, more efficient, we have fracking, 3 d printing, roboti robotics, the cloud, smart phone, tablet, apps, all of these things are making us more productive, more efficient, more profitable. that's why stocks are up. not because of what the fed is doing, and my second point to go to what we just heard, the government has not cut spending. it's not cut redistribution to individuals. to say that is just not true. in fact, i believe the bigger the government is, the more taxes we have the more we try to help people the worse we make the middle class. >> all right. well let's reverse this then, gus. let's say when interest rates start to rise, does that then
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disproportionally hurt the wealthy that benefitted to this point? >> no, if interest rates are rising, the federal economy is doing better and can with stand higher interest rates. the federal reserve is trying to lift all boats. we want a stronger market, to see wage gains and jobs and if the fed is raising rates, that's a signal they think this is occurring. it's not a question who winds or loses, how do we all benefit from stronger economic growth? >> gus, how do we fix this income inequality situation? >> how much time do you have? that's a huge issue and obviously, we have the answers i wouldn't be here today. you know, there are a whole bunch of issues that need to be resolved but the question is, workers are more productive. we're absolutely right about that. the question is how do workers benefit from the productivity gains? right now the gains are going primarily to holders of capital but we want to have an economy where pros par pros party is sh
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>> are you suggesting there isn't an income disparity in the united states right now? >> oh, there is an income disparity. the question is where did it come from? my belief is that during times of tech thnology advance. michael jordan made more inflation adjusted than babe ruth ever made. you can say they dominated the sports in equal fashion. why did michael jordan make so much more than everybody else? well, it's because of tv. he was a worldwide sports star, and that's the same with technology. microsoft sells their software to 6 billion people in the world, not just to 3 million people in chicago, let's say. so as the global market opens up and as technology broadens things out, there will be people that benefit massively compared
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to the average. >> let me ask real quickly from both of you, how long will it take for the middle class to feel good again? maybe not as good as michael jordan but to feel better than the way the situation is now? gus, you first. >> i think in about a year, i think we'll see contestant job growth and the unemployment rate continue to fall that will lead to a tighter labor market and households will feel better by next year. >> brian? >> sure, i won't disagree with that. i think households are feeling better today than they did a year ago or say three years ago. we can see it in consumer confidence data, but to really get back to the '80s, and '90s or '50s and '60s when most people felt good about the future. we have to cut the size of government. we can't have taxes this high and spending this high and ever hope to achieve that level of prosperity that we got used to in the '80s, and '90s.
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>> good conversation, thank you. >> thank you. when you think about big recreational vehicles, you think winnebago. earnings topped wall street expectations and the ceo said third quarter revenues the strongest since 2005. that's a dramatic change from a few years ago when consumers pulled back on big ticket purchases. morgan brennan has more on when is driving winnebago's rebound. >> reporter: you've seen them at camp sites and maybe you've driven one on family vacation. winnebago just reported quarterly earnings, showing the company is experiencing a come back. >> i think it's another solid impressive quarter. the recovery in the u.s. is well underway and has been for awhile after bottoming out during the crisis a few years back at around 13,000 units. >> reporter: the quarterly revenue was the highest since 2005, and earnings jumped nearly
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50%. that thanks to increased demand for models less expensive and more family oriented. rv retailers say despite the tough winter weather, more consumers are making these big ticket purchases. >> activity is better than its ever been. i've been selling winnebago for 28 years. they are opening new plants to accommodate the sales. >> reporter: baby boomers are the biggest buyers with ages 55 and over accounting for 60% of u.s. motor home sales. winnegabo is a smell cap stock but they watch with interest because motor homes are closely correlated with consumer conto dense, as well as the housing market. as the economy continues to recover and as long as the housing rebound takes course, companies could continue to see strong sales. still, there are head winds to watch for, rising interest rates and rising gas prices. as motor homes may have all the comforts of home but lack in
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fuel efficiency. for "nightly business report", i'm morgan brennan in lakewood, new jersey. arts and crafts chain michael's is getting ready to return to wall street but there are things investors should keep in mind before digging into the stock. well, it's official, allibabba is headed to the new york stock exchange. the giant which is owned by ya hue has chosen to list shares under the ticker symbol baba. when it makes the trading debut this summer, it could be the largest technology ipo in u.s. history, even bigger than facebook's $15 billion initial
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public stock offering two years ago. in the meantime, investors don't have to wait too long to buy shares of michael's, that's the big arts and crafts chain expected to trade again tomorrow following eight years of private ownership. more on how michael's crafted it's come back to the equities market and the challenges it faces. >> reporter: the nation's largest arts and crafts retailer is sewing up the final retails. it's relisting tomorrow trading under the stock symbol mik after being taken private in 2006. in that time sales have grown 1% with a store base that's grown to more than 1142 stores today, plus, it's profitable. when it comes to the product, makes a little over half of the sales come from crafts, home decor and seasonal items and
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framing and scrapbooking make up the rest. it's a market leader in the arts and crafts space out selling competitors, joann stores and hobby lobby. the platform and expanding store base are both expected to continue to contribute to increasing sales. those following michael's progress say it's a well-run business but question how much growth there is in the arts and crafts retail sector. >> crafts are back. it's starting to grow again and went through a period of growth, kind of retrenchment and growth again, but this company itself has to fight the battle with two tough coal pmpetitors. >> reporter: one of two retailers offering the rainbow loom. the success of the rainbow loom is the primary reason sales increased for the past fiscal year but there is concern the trend could ease. other risks to michael's growth
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include a debt load and still unknown costs related to a data breach that took place over a period of nine months from june 2013 to february 2014. it's been a difficult year for retailers, and consumer related initial public offerings have been received with mixed results. michael's business model is strong, it may keep investors on the sidelines. for "nightly business report", i'm courtney region. wall street got in on the action buying shares of go pro. shares of the company that makes wearable cameras used by skydives and surfers surged. go pro offered 18 million shares valuing the company at about $3 billion making it the biggest initial public offering of a consumer electronics company. nick woodman says they are not just a fad.
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>> if go pro can make it easier than any company in the world, make it easier for our customers to share professional quality personal content, that's an opportunity that's never going to go away. >> and the stock jumped 30% to $31.34. now lennar posted earnings that beat the top and bottom line. the home builder sold more homes at higher prices with new orders and deliveries increasing. it's average saling price was higher due to a tighter supply of homes. but despite that good report, shares were off to $41.32. >> better than expected increase in revenues, the food company is forecasting a modest recovery in the private brands unit and expected that it's healthier options will help the consumer brands. shares rose to $28.97. spice maker mccormick saw
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revenue come in below forecast that sent shares lower. seeing stronger international performance because of the acquisition of an overseas maker. the stock fell more than 1% as a result of $70.27. alcoa is taking a plunge into the aerospace industry with announcing today the giant is spending more than $3 million to built the company. that deal will up the revenue by about 20% which ceo kline field says is good news. shares popped on alcoa up more than 2.5% to 14. 94. shares of elizabeth ard oen plunged. it's days after a sweeping restructuring due to mounting losses. that stock fell 17% today to
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$22.41. reenrolling for a federal health care plan next year got easier. the obama administration will allow automatic renewals in the affordable health care plan for 2015 for 95% of the people signed up in a federal exchange plan. coming up on the program, just as germany beat the u.s. in the world cup match. will general electric be topped. the two industrial titans go head-to-head next. in case you missed it, today's highly anticipated match ended with a 1-0 victory for the
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german team but despite the loss, the u.s. was able to advance to the next round of 16 teams. in the next round of nbr's ultimate stock cup, we put two of the world's biggest industrials against each other, namely we want to see who will come out of the global marketplace on top. seamans or general electric. watch. ge's roots go back to thomas edison. his edison electric light company merged with thompson houston electric to form general electric in 189. headquarters, fairfield, connecticut. 2013 revenue, just above $146 billion. ge is the last of the original 12 companies in the dow jones industrial average still listed. long gone are the days known mostly for light bulbs. ge makes trains, jet engines, power turbines and medical devices but the finance company,
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ge capital made up more than half the business. ge's german counter part siemens a head quarters in germany. 2013 revenues, more than 109 beside. siemens and ge compete in many of the same fields but siemens is more of a global player that makes the rival to buy the french power company interesting. it's well connected to emerging markets like china and it's the kind of company that can make ge more of an international power house. peter joins us with his play by play of ge and siemens. he's manager of hunting ton funds. you're saying that siemens is your choice in this competition? >> a bit of a contradiction
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there it is, susie. siemnes has a clear road map. we're seeing world power grids and a need to improve the efficiencies of those grids. siemens has 30% of the business overall is in that area. we have a well established footprint and they are well established in a number of outside of their domestic markets right now. that said, ge has been growing faster in those markets and so i can see why the deal made sense for siemens is an ability for them to jump started properduct. it makes sense but siemnes in daring do forced ge to accept terms on the deal that are going to make it much more complex to
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execute. it's going to bring a lot of other players in. this is why we think siemens is the stock to earn because it's clear sailing ahead. they have a better revenue visibility going. for ge, there is a lot of execution risk and we think that will district the stock for awhile. >> yeah, ge portrayed the victory as just that, a victory over siemens. you're say thing is not a slam dunk, is it? >> no, it's not. for anyone whose been in the stock for as long as we have, which is well over a decade now, the deal which was also supposed to be one that made huge sense for ge medical equipment has really been a bit of a disappointment and we've struggled every quarter with something that kept that from firing. if you're a ge shareholder, you get a little deja vu and you start to get nervous that we've heard this song before and you worry about, gee, what's my return going to be in the next
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ten years. >> so for investors, if they want to put new money in, you're saying put it into siemens. the stock is around $100. how much can they expect on the upside if they do that today? >> in the next 12 months, if everything goes as we're forecasting, you can see a 10% run in siemens share price. that doesn't include a comparable dividend of 3%. so a fairly news return. the dollar is expensive relative to the eros so a good time to buy and we don't think in the next 12 months you'll get that price performance. too many investors will sit on the sidelines and not race to own it thanks a lot, peter. so you just heard our guest. he prefers siemens over ge. who do you prefer on the global stage? ge or siemens. vote on nbr.com. for the results from
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tuesday's global rivals challenge where we asked you to choose between mcdonalds and yum brands. well, the winner is mcdonalds but it was close. 49% of you voted for yum. 51% for micky d's. gm is recalling 29,000 chevy cruze vehicles. gm told dealers to stop selling many of them. that's it for "nightly business report." i'm bill griffeth, thanks for watching. >> i'm susie gharib. have a great evening, everybody. see you tomorrow. how go you know if you or
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